Why are central banks continuing to behave as though we are in the midst of an economic crisis?

If you believe their rhetoric, it is mainly due to fears of “deflation.” But rhetoric does not equal reality in this case. As one can readily see in the above table, CPI increases are positive, not negative, in all countries maintaining easy money policies.

Which brings us to the title of this post.

Under the guise of deflation, central banks were aggressively easy when Crude Oil declined over 70% from mid-2014 through early 2016.

Over that time, inflation expectations (as measured by the 10-year breakeven inflation rate), plummeted. The European Central Bank (ECB) and Bank of Japan (BOJ) pushed rates into negative territory, and have maintained those policies ever since.

Will this evidence of reflation bring an end to the longest period of easy money in history?

We’ll only know in hindsight, but it’s a disconnect becoming more glaring by the day. How much longer will global central banks maintain crisis-era policies when there is no such crisis?

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